If you run a construction business, chances are your earnings vary wildly from month to month. You may juggle multiple projects at once along with a long list of building materials — all of which cost a pretty penny before you even get paid.
Thankfully, recording your business transactions throughout the year can help you protect your bottom line. Here’s why keeping track of costs is an absolute must for your construction firm.
Why you should keep track of your construction costs
Manage the cost of doing business
If you want to make your construction business a success, you need to know how much things cost. That sounds simple enough, but things aren’t getting any cheaper these days — whether you’re footing the bill for materials or even paying your subcontractors.
Keeping an eye on how much you’re spending (and what you’re spending it on) can help stay in control of your finances. The more data you have, the easier it’ll be to track your costs from project to project.
Make stronger business decisions
In our experience, a well-informed business owner makes stronger financial decisions. You can plan much more effectively if you have the numbers right in front of you.
That’s why solid bookkeeping is essential — particularly if you need to draw up a business plan. With all your financial data to hand, you’ll be able to create accurate forecasts and set realistic business goals with ease.
And if you’re worried about tight profit margins, monitoring your business expenses can help you budget for individual projects more effectively.
Give accurate estimates to clients
Look, we know that the last thing you want to do is overcharge your clients. It’s not good for their wallet (or your business’s reputation!).
Good record-keeping can make it easier to give accurate quotes. This can help you gain your clients’ trust, boosting the chances of them working with you on future projects or recommending you to their mates. Remember: word of mouth is a powerful tool.
Accurately calculate your taxes
Completing your annual tax returns can be a nightmare if you don’t have your ducks in a row. You’ll need to hold onto your receipts to stay compliant and maximise your tax savings.
The more detailed your records are, the easier and less time-consuming it will be to claim business expenses and provide proof if HMRC requests it. Tracking your costs can also reduce the chances of errors on your return, helping you avoid costly non-compliance penalties.
Meanwhile, keeping digital records is now compulsory for VAT-registered businesses under Making Tax Digital for VAT rules.
The right approach
Singing the praises of tracking costs is all well and good, but what about putting it into practice?
For starters, you should sign up for cloud accounting software, such as Xero, if you’re not using it already. Technology can do half the job for you, making record-keeping a lot less stressful and time-consuming.
If you really want to stay in control of your finances, working with an expert can make a world of difference. As construction industry accountants, we have years of experience working with firms like yours, so you can rely on us to do things properly.
Get in touch to speak to accountants who understand the construction industry inside and out.